Effects of the pricing and cooperative advertising policies in a two-echelon dual-channel supply chain

• We examine the impact of price schemes and cooperative advertising mechanism on the dual-channel supply chain competition.
• The traditional retail channel and the direct online channel are investigated.
• The local advertising, brand name investments and items’ price can influence market demand.
• The direct online channel model outperforms the traditional retail channel model in profit improvement.
• A revenue-sharing contract could be applied to eliminate the channel conflict.

The rapid development of e-commerce has reduced the intermediary channels between manufacturers and consumers and changed consumption patterns. However, channel conflicts occur when manufacturers engage in direct sales. Using traditional and direct online channels as its setting, this paper evaluates the impact of price schemes and cooperative advertising mechanisms on dual-channel supply chain competition. Our analysis offers structural and quantitative insights into the interplay between upstream and downstream entities in the supply chain, helping managers to understand the interplay between the upstream and downstream entities of a dual channel structure.